A futuristic vision of Bangladesh’s RMG industry
MOHAMMAD ASHRAFUL ISLAM KHAN and RAGEEB SHAHRYAR |
Dec. 20, 2021, 9:02 p.m.
Bangladesh’s ready-to-wear industry is said to be the lifeblood of Bangladesh. “Made in Bangladesh” has earned its respect around the world. The RMG sector has played a vital role in the growth of the country’s economy, contributing up to 83 percent of export earnings. The garment making journey in Bangladesh began about 61 years ago in 1960 with Reaz Store, later named Reaz Garments Ltd. It was not until 1973 that the Bangladesh RMG industry first exported clothing overseas.
The garment industry in Bangladesh has experienced massive growth due to the EU’s GSP regime, tax exemptions for foreign companies, the establishment of EPZs and subsequent LC facilities for manufacturers, which has made it possible small and large manufacturers to develop. According to BGMEA, 135 LEED green garment factories certified by the US Green Building Council (USGBC), Bangladesh has 9 of the top 10 green garment factories in the world, in addition to 500 other factories are in the process of achieving LEED certification. Although the industry boasts of having the largest number of LEED-certified factories in the world, it still has not gained the capacity to diversify. It seems that the industry has found its comfort zone in manufacturing low cost products, hence the minimal investment in diversification. According to industry experts, around 99% of the accessories needed to make cotton or knit products are sourced locally, while other essentials like polyester and synthetic fabrics are sourced from countries like Taiwan, China. China and Korea. This lack of backhaul not only increases shipping time, but forces workers to compensate for the delay in supply. According to industry expert Ms Shwapna Bhowmick, head of Marks and Spencer’s country sourcing office in Bangladesh, Bangladesh has the potential to grow to $ 80 million from Marks and Spencer alone. if the country invests in value-added products like laces, bras and other accessories. This dependence on foreign suppliers has left us with very little bargaining power, costing a large part of the revenue generated by the shipments. According to the Bangladesh Bank Research Department, RMG raw material import for July-September FY’21 amounted to 2,845.83 million, or 35.02 percent of total exports.
It is unfortunate that the third largest manufacturer and exporter of ready-to-wear clothing in the world still struggles to achieve the longest export lead time. It’s understandable that not all companies have the ability to have an in-house supply chain when many industry giants have an in-house freight forwarder and C&F to get the job done as quickly as possible. However, there have been minimal initiatives to use expert 4PL companies like Maersk, which has immense potential to reduce lead times and make shipping profitable. Bangladesh, which now has the shipping time to the United States of around 77 days and to European countries of around 55 days, is the highest compared to its competitor countries like China, Vietnam and the ‘India. It is not only the lack of involvement of the experts of the 4PL service, but also the lack of digitization that has given rise to the delays. The documentation process and the buying process may seem nostalgic and date back to 2010. Although the apparel industry is considered a low-tech industry, the industry pioneers have hit rock bottom when it comes to to digitize this sector. It was only after 2012, when the incidents at the Rana Plaza and Tazreen factories occurred, that investments were made to address the infrastructure shortcomings, but the supply chain failed. still little or no progress. A good way out might be to use apps like Klopman’s “Supplier Portal” to speed up supply chain processes. Involving such an application should reduce lead times as it will keep necessary parts of the supply chain in a loop without causing delay and can also help find the organization bottleneck.
What Mr. Nurul Kader Khan, founder of Desh Garments and pioneer of Bangladesh’s RMG industry achieved in 1979, is not yet understood by many today, that skilled labor is an important resource. for the organization. Even in 1979, Mr. Nurul Kader had the mentality to invest in training 130 Daewoo employees in order to build an efficient workforce. Needless to say, Bangladesh receives most of its orders due to its low manufacturing costs. While trying to keep this “low cost of manufacture”, most companies lost their bargaining power and made little or no effort to train their workers. Since the country is teeming with unskilled and jobless workers, we can also see that employee productivity is much lower than that of China or other competitors. An industry that employs 4.2 million workers has virtually no white-collar women. Most women or even educated men find this industry very risky due to frequent riots and conflicts between blue collar workers and management. In fact, white-collar workers are often demotivated when the company hires a foreign manager in an important decision-making role for the company. When asked about business owners why they prefer to hire a foreign employee rather than a local one, they usually respond by saying that they lack local professionals knowledgeable in this field who can communicate effectively with foreign colleagues, which is a necessary skill, otherwise they (the owners) would not “waste their money” by hiring well-paid foreigners. In an effort to educate future industry leaders, the Bangladesh Garment Manufacturers and Exporters Association (BGMEA) established its BGMEA University of Fashion & Technology institute, but this effort has barely yielded any results at all. over the past ten years.
With the current productivity and achievements, the industry has a lot to improve and needs proactive thinking to continue to evolve in the desired way.
Mohammad Ashraful Islam Khan, Head of Supply Chain Advisory Services, KPMG Bangladesh. Rageeb Shahryar, Supply Chain Management Intern, Walton Hi-Tech Industries Limited.